Cyber Times International Journal of Technology & Management

The crisis in financial markets has spread at an alarming rate. Though the epicenter of the crisis was the US sub-prime mortgage market, its shockwaves are being felt in financial markets all over the world. During booming years when interest rates were low and there was great demand for houses, banks advanced housing loans to people with low credit worthiness on the assumption that housing prices would continue to rise. Later, the financial institutions repackaged these debts into financial instruments called Collateralized Debt Obligations and sold them to investors world-wide. In this way the risk was passed on multifold through derivatives trade. Surplus inventory of houses and the subsequent rise in interest rates led to the decline of housing prices in the year 2006-07 which resulted in unaffordable mortgage payments and many people defaulted or undertook foreclosure. The house prices crashed and the mortgage crisis affected many banks, mortgage companies and investment firms world-wide that had invested heavily in sub-prime mortgages. The financial crisis has not only affected United States of America, but also European Union, U.K and Asia. The Indian Economy too has felt the impact of the crisis to some extent. The present study makes an attempt to identify the immediate impact of the financial crisis on Indian economy in terms of selected economic indicators and identify some causes for financial crisis. The study also examines the trends in export, import, foreign remittances, earnings from business services, overall Balance of Payment position, GDP growth rates etc. in the context of Indian.